High domain prices might make purchases for direct navigation too costly.
At an entrepreneurs’ retreat in Mexico earlier this year, I stumped about domain names and how entrepreneurs can use them to their advantage. One of the topics was using generic domains for “direct navigation”. For example, an entrepreneur who sells sports equipment might use BaseballBats.com to direct targeted traffic to his site.
One of the entrepreneurs in the room was a successful affiliate marketer. He uses Google ads, SEO, and other channels to deliver leads and sales to customers. He’s good, too. His small company pulled in many millions more than even the best individual domainers last year.
I asked him point blank: Do you use direct navigation domains in your business?
“No,” he replied. “It’s too expensive.”
He pointed out that the cost of generic domains is so high, that it would take many years of traffic to make it cost effective compared to buying search ads. He could spend on Google ads for many years before making up for the difference in cost. So many years, in fact, that it doesn’t make sense to choose direct navigation.
I agree that this is often the case.
First, we don’t really know if direct navigation converts better than search. I know, I know, there have been a couple studies about it. But they point both ways. And it’s really a keyword specific issue much of the time. In talking to another friend who manages millions of dollars a month in online ads, he finds that direct navigation ads work best for very specific topics (such as loans, auto leads) and not for others (computer systems and tech-savvy niches).
Second, I disagree when people use the example of someone buying a boat as justification for a domain price. For example, someone who owns a speedboat domain would say, “If a click on my domain turns into a sale of a boat, then the domain is worth a lot!”
True, but that goes for all types of advertising. If someone clicks on a Google ad and buys a boat, then that click was worth a lot.
Direct navigation can be an important tool for getting quality traffic. But have domain prices increased too much to make it cost effective?
steve says
True to a certain extent, BUT has he compared the ROI on ads pointing to generic domain names? If someone is faced with two ads:
1. Buy Boats from us! http://www.jonsboatyard.info
2. Buy Boats from us! http://www.boats.com
Which would get the better quality of traffic?
Gordon says
Great post. I completely agree with several points – especially the one about using the example of a boat sale making a domain valuable. If you spend $25k on a boat domain and get a sale you aren’t half as smart as the guy who spent $250 on google clicks and sold a boat….
I would also say that putting money into SEO can be significantly more valuable to many businesses than buying domains or buying PPC.
I love generics and direct navigation, but sometimes people get ahead of themselves.
Based on todays prices, buying the generic for the long term brand / category ownership makes a lot more sense than for the traffic in most cases.
Ellie says
Okay, I’m exposing my ignorance here. Can someone explain to me SEO? I mean, I understand buying ad on Google or being a sponsored listing but does putting money into SEO mean hiring some expert to tell a company the best keywords they should use on their website? Do people actually get paid for that? Thanks for any insight.
Lda says
The viewpoint of that businessman is neither surprising nor unexpected. It also does not have any major implications for purchasers of high profile domains.
Rev-x or traffic-conversion value perspectives for undeveloped domains will always have upper asymptotes above which individual domain ‘values’ cannot easily move, because they are tied only to traffic volume.
However, for the class of generics that are sought after for their ability to be prominent flagship names for products, services, businesses IPOs etc., this viewpont is non-applicable.
Intrinsic worth for the latter type of generic does not have a limiting upper asymptote, as valuations are largely tied to overall product or company worth, and any natural traffic will be enormously augmented by being thus associated.
Of course modern domain prices now lock the businessman you quote out of buying high value domains just for their traffic alone.
His world has also evolved. If he has no intention in maximising the potential of a domain, but just redirect its native traffic, he goes to a cheaper source of traffic. No big deal.
Bill E says
As pointed out, it may take many years of traffic to make purchasing a generic domain cost effective compared to ppc advertising, but he seems to be discounting the fact the the domain itself would become a business asset that would appreciate over time.
Essentially, once the domain is sold, probably at a profit from the original purchase price, all the traffic it sent during the holding period would have been free.
Gordon says
Lda, good post – they key piece imo is the “prominent flagship names for products, services, businesses, IPO’s etc”.
Ellie – SEO is a big business. It is about getting listed high in the “natural” search listings on google – not the paid ones. My last company paid over $100,000 per year to have an outside company help us with this. I am pretty good at it myself, and it has proven very profitable.
I have a few sites that get about 1,000 visitors per day, 98% or so from search traffic. If i was buying those clicks it would cost me $500-$1,000 per day.
David J Castello says
Your affiliate marketer is missing one of the biggest reasons for a business owning a mega-generic: monopolizing public recognition/branding. This is not surprising because I’ve had the same conversation with many in his position. They are so focused on the forest that they don’t see the trees.
Click on Rum.com or Scotch.com and see where it goes. These companies get it.
Rob Sequin says
If he spends money on google ads for ten years then stops, soon his traffic will be down to zero. If he buys a direct nav name and pays for it for ten years and then stops, he has a great asset.
So after ten years you have nothing or something substantial.
Direct nav might be too expensive in the short term or someone with limited time.
Gordon says
I agree with David more than Rob.
Rob – You could put the same amount of money into SEO and have 100x the traffic that you would get from type ins.
The real value is the branding / category ownership…
Rob Sequin says
I’ll never argue with development and good SEO. What this guy was talking about was spending the money on Adwords vs spending the money to purchase a direct nav name.
It’s funny, large corporations will spend $10,000 for a one page ad in a magazine for one month but try to get them to buy a good domain for $10,000. Nope, that’s some other department.
Ellie says
Thank you for taking the time to respond, Gordon. I guess it is hard for me to understand why “experts” on SEO are so highly paid. I mean, there are a limited number of keywords that are applicable to any particular good or service…it’s a matter of selecting the best ones which could easily be determined through a series of trials.
People get rich off of telling domain owners what metatags to have on their site? What a world. And some folks complain about those of us who merely buy and trade domain names.
But thanks again…I haven’t always had such a polite respond to a request for more information.
damir says
Is Direct Navigation Too Expensive? – short term and LONG term that kind of domain names will pay for themselfes since their $$value will increase with time as the demand is increasing.
It would be very EXPENSIVE to stand by and do nothing.
Lda says
Ellie.
Good SEO people are worth their weight in gold – literally. SEO is much much more than just fiddling with metatags. Those with longer web memories will recall a different Google where the first 3-10 pages of any search were stacked with smut links. In those days metatag stuffing and ‘invisible’ pages (where the text color matched the background color) full of dictionary keywords was enough to beat the Google algorithms and achieve higher page placements. Those days are long gone. If you try many of the old tricks, Google will ‘punish’ you severely. As Google never reveals their algorithms, SEO is now a ‘Black Art’ where to achieve any serious effect, constant in-depth research etc. is essential. That’s what SEO ‘experts’ are paid for. There’s many good starting points. The following two links should prove useful reading.
http://www.seofaststart.com/
http://www.seogeek.info/
Please note, absolute knowledge on SEO is rare, opinions abound.
Boating says
I’m totally agree.
Its hard to say, but Id say SEO is worthwhile